Using High-Low to Calculate Fixed Cost, Calculate the Variable Rate, and Construct a Cost Function

Pizza Vesuvio makes specialty pizzas. Data for the past eight months were collected:

Month	Labour Cost ($)	Employee Hours
January	7,000	430
February	8,140	620
March	9,899	720
April	9,787	680
May	8,490	550
June	7,450	420
July	9,490	640
August	7,531	380

Pizza Vesuvio's controller wants to calculate the fixed and variable costs associated with labour used in the restaurant.

In your calculations, round the variable rate per employee hour to the nearest cent and use in subsequent requirements. If required, round your final answers to the nearest cent.

Required:

1. Using the high-low method, calculate the fixed cost of labour. $___________

2. Using the high-low method, calculate the variable rate. $ _____________per employee hour

3. Using the high-low method, construct the cost formula for total labour cost.

Total labour cost = $_____________ + ($__________________ Employee hours)